Rise of the placemakers

The firm that has transformed property development in London

FIVE minutes’ walk from Manor House in Hackney is a picture of London’s architectural future. A strip of 1930s semis cuts through a large council estate. Some post-war brick blocks are handsome; other concrete ones resemble Soviet housing. New apartments in brick and neat cladding are dotted between them. At the centre stands an ultra-modern 27-storey tower.

The rebuilding of Woodberry Down is the work of Berkeley Homes, London’s biggest housing developer. Some 2,000 ageing council homes will be replaced by 5,500 new ones in a public-private partnership. As pressure to increase inner-London housing intensifies, such schemes are becoming more common. And Berkeley is responsible for a disproportionate share. In 2013 it built 15% of new homes in London—twice as many as its next-biggest competitor. The firm is the perfect example of what Tony Travers of the London School of Economics calls a “parastate” developer: so intimately linked with government that it might as well be a part of it.

In Greenwich, Berkeley has rebuilt the Ferrier Estate, a grim 1970s housing estate, and renamed it “Kidbrooke Village”. On the site of the former Woolwich Arsenal, it is currently building a “vibrant riverside quarter” of high-end flats near to the planned new Crossrail station (which Berkeley has part-funded). In Islington, the firm is behind 1,000 new homes approved by Boris Johnson, London’s mayor, despite local-council objections. At Vauxhall it is responsible for St George’s Wharf with its unlovely cigar-shaped tower.

Berkeley started out in the 1970s as a fairly ordinary builder: its early years were spent putting up suburban “executive homes” in the south-east. But it has adapted quickly to changing markets. In the 1990s, the firm rushed to revive Britain’s second-tier cities, only to leave again when that boom faded. Now 80% of the homes it builds are in London. Its best customers are well-heeled and are often foreign investors: Berkeley has been selling homes overseas for decades. The idea, says Mark Collins, of the CBRE, a property company, is to sell a lifestyle. Its brochures are full of smart models sipping champagne.

Behind this success is financial strength. Unusually, Berkeley does not rely much on debt. “Any mug can stand in a bull market and gear themselves up,” says Tony Pidgley, the firm’s staunchly working-class chairman (in the picture, on the left). Since capital comes from reinvested profits Berkeley can ride out slumps, buying land when no one else can. This makes it uniquely able to do the sort of long-term regeneration schemes that politicians like. Hence projects such as Woodberry Down, which will take 20 years to complete.

Berkeley’s relations with London politicians are, in some circles, legendary. Mr Pidgley, who is also the president of the London Chamber of Commerce and Industry, has accompanied Mr Johnson around the world. He often appears at City Hall events. A ceremonial trowel, valued at £500 ($830), is among the gifts he has presented to the mayor. Links at borough level are strong too. The former leader of Greenwich Council, Chris Roberts, who helped to approve several Berkeley projects, owns a home the firm built, notes Darryl Chamberlain, a local blogger.

Unsurprisingly, Berkeley is used to controversy. Planners complain the firm is too powerful, even as they rely on it. Its regeneration projects offend some: homeowners and tenants can be evicted to make way for construction. Accusations of “gentrification” and “social cleansing” fly. Yet the firm maintains it is better than competitors. It spends heavily on building schools, civic centres and other infrastructure before any homes are sold. Demolition is done in stages to try to reduce “decants”—a euphemism for temporary evictions.

Berkeley’s grip seems sure to strengthen. London’s housing shortage means that pressure on complex urban “brownfield” sites will not relent. Few councils these days have the resources or knowledge to rebuild their crumbling estates or redevelop old industrial sites themselves. That makes housing supply dependent on a few well-capitalised developers. Planning applications become a negotiation: politicians try to extract subsidised housing, schools and parks for their voters; developers vie for the right to build as many profitable luxury apartments as possible.

But competition is growing, says Adam Challis, of Jones Lang LaSalle, an estate agent. A number of foreign developers have set up in London in recent years. Unlike British firms, they usually have access to plenty of long-term capital. They are developing their political links too. The Malaysian corporation sprucing up Battersea Power Station is one striking example. Berkeley has created the model for the rebuilding of London. It may now have a fight to stay on top.